Managing Strategy Chapter 9 Learning Objectives 9.1 Define strategic management and explain why it’s important. 9.2 Explain what managers do during the six steps of the strategic management process. 9.3 Describe the three types of corporate strategies. 9.4 Describe competitive advantage and the competitive strategies organizations use to get it. . Strategic Management Strategic management what managers do to develop the organization’s strategies Strategies he plans for how the organization will do what it’s in business to do, how it will compete successfully, and how it will attract and satisfy its customers in order to achieve its goals Business model how a company is going to make money Why is Strategic Management Important? Helps managers decide how to act in face of change and uncertainty Helps complex and diverse organizations work together Has a positive impact on performance Strategic Management Process Strategic Management Process Mission: the purpose of an organization Components of a Mission Statement Strategic Management Process Opportunities: positive trends in the external environment Threats: negative trends in the external environment The “what” of the organization Resources: Capabilities: Core competencies: an organization’s assets that are used to develop, manufacture, and deliver products to its customers an organization’s skills and abilities in doing the work activities needed in its business the organization’s major valuecreating capabilities that determine its competitive weapons Strategic Management Process Strengths: any activities the organization does well or its unique resources Weaknesses: activities the organization does not do well or resources it needs but does not possess SWOT analysis: an analysis of the organization’s strengths, weaknesses, opportunities, and threats SWOT Analysis Combining Step 2 and Step 3 Internal Environment Strength any activities the organization does well or any unique resources that it has. Weakness activities the organization does not execute well or needed resources it does not possess. SWOT Opportunity External factors that organization can exploit Threat External factors that can affect organization negatively External Environment 9 Strategic Management Process Competitive Functional Corporate Types Strategy: A plan of action designed to achieve a long-term or overall aim. Strategic Management Process No matter how effectively an organization has planned its strategies, performance will suffer if the strategies aren’t implemented properly. How effective have strategies been at helping the organization achieve its goals? What adjustments are necessary? Examining the Different Types of Strategy Examining the Different Types of TYPES Strategy Renewal Growth Corporate strategy: an organizational strategy that determines what businesses a company is in or wants to be in, and what it wants to do with those businesses Stability Growth strategy: A corporate strategy that’s used when an organization wants to expand the number of markets served or products offered, either through its current business(es) or through new business(es) • Concentration • Vertical integration • Horizontal integration • Diversification Stability strategy: A corporate strategy in which an organization continues to do what it is currently doing Renewal strategy: A corporate strategy designed to address declining performance Managing Corporate Strategies BCG matrix: A strategy tool that guides resource allocation decisions on the basis of market share and growth rate of SBUs Cash flow Desired movement Divest Competitive Strategies Competitivestrategy: strategy: Competitive Anorganizational organizationalstrategy strategyfor forhow howan anorganization organizationwill willcompete competeininits its an business(es) business(es) Corporation Strategic Business Unit (SBU) Halal Integrated Poultry and Manufacturing The Role of Competitive Advantage Basis of advantage (example from the industry) Quality Technology Low Cost Other Factors Competitive advantage: What sets an organization apart; its distinctive edge Sustaining A Competitive Advantage Businesses must not only develop a competitive advantage but they must also sustain it. Warren Buffett’s “Economic Moat” idea Sustaining competitive advantage by protecting long-term profits and market share using various means. Sustaining A Competitive Advantage Power of Suppliers Examining power of suppliers over businesses Threats of New Entrants Examining barriers to entry Current Rivalry Examining the competitiveness in industry Threats of Substitutes Do buyers have other options? Power pf Buyers Examining power buyers over businesses Porter’s Five Forces Model Choosing Your Competitive Strategy Cost Leadership Strategy Differentiation Strategy Focus Strategy Struck in the Middle Functional Strategies Functional strategies: A strategy used by an organization’s various functional departments to support the competitive strategy Some clothes with dual functions – for home and work Competitive Strategy Differentiation Functional Fast Fashion Production Customer Service Outsourcing to cheaper nations “Welcome to UNIQLO chant R&D Worked on new materials with Toray Industry – Airism (cool material) & Heatech (warm material) Working with fashion houses and designers Fashion items with short life time Sales & Marketing Human Resources Training on the UNIQLO way – how to fold clothing, eye contact with customer, customer greeting Important Strategies for Today's Businesses E-Business Strategies First Mover Customer Service Strategies Innovative Strategies Mass Customization Social Media and Digitalization First Mover - Advantages and Disadvantages Be the first in market